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Oil prices fell on Monday amid concerns about the economic impact of a possible interest rate hike by the Federal Reserve and weak Chinese manufacturing data, which are enough to offset the supportive impact on oil prices of the new OPEC+ production cuts that took effect this month.
The Federal Reserve, which meets on May 2-3, is expected to raise interest rates by another 25 basis points. On Monday, the dollar rose against a basket of currencies, making oil more expensive for holders of other currencies.
Brent crude fell $1.64, or 2%, to $78.69 a barrel by 0947 GMT, and US West Texas Intermediate crude fell $1.66, or 2.2%, to $75.12.
“The fact that Brent has not reached a stronger level above $80.50 (a barrel) indicates continued selling interest amid well-known growth and demand concerns,” said Ole Hansen, Head of Commodities Strategy at Saxo Bank.
On Monday, US regulators noted that concerns about the banking sector had overshadowed oil in recent weeks, and the assets of First Republic Bank were seized and an agreement was concluded to sell it to JPMorgan, making it the third major US bank to fail in two months.
Attention was also focused on weak economic data from China. China’s manufacturing purchasing managers’ index fell to 49.2 from 51.9 in March, official data showed on Sunday, dipping below the 50-point mark that separates expansion from contraction in activity on a monthly basis.
On the other hand, oil got some support from oil production cuts of about 1.16 million barrels per day, based on a surprising decision taken last month by the OPEC + alliance, which includes the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, which will take effect from Monday.
